Gulf states' high-risk pools may need to assess insurers.

Three Gull Coast states' high-risk insurance pools are quite likely to face the test of their financial wherewithal in the aftermath of the damage infected by Hurricane Katrina. Officials are confident they have enough funds to pay homeowners claims, but in the end, these programs will likely levy assessments on all property insurers in their respective states, which will then pass on those assessments via surcharges on polio/holder premiums.

The Alabama program may be the first to have to assess its members, the companies writing property insurance in that state, said Don Griffin, vice president of personal lines for the Property Casualty Insurers Association of America.

Deputy Alabama Insurance Commissioner David Parsons didn't dispute that, saying that even without knowing insured loss estimates, the Alabama Insurance Underwriting Association, or the Beach Pool, would issue an assessment on all property insurers writing business in Alabama.

"We are in a position to go ahead and issue an assessment a lot quicker than they (Mississippi and Louisiana) are," Parsons said. "But l can tell you that if I was Mississippi, I would probably go ahead and assess the maximum that I could assess over there, and I'm sure they will. We are going to do the same."

Mississippi insurance regulators couldn't be reached for comment.

The AIUA's assessment, to be determined by its board, likely would total roughly $20 million among all property insurers in the state, Parsons said. The AIUA is an association of all property insurance companies writing business in Alabama, he explained.

About 34 states have some form of state-run entity to provide insurance to those otherwise unable to obtain coverage because they're considered high risk. Only a dozen or so of these plans, called Fair Access to Insurance Requirements, or FAIR plans, offer homeowners coverage. Some are specifically for coastal areas, while others are for any property in the state that's considered high risk. FAIR plans operate by charging premium but have the ability to tap the voluntary market for additional money if needed.

Alabama's insured losses are expected to be significantly less than Louisiana's, as well as Mississippi's, Parsons said, guessing that Alabama's total insured losses likely would top $1 billion, however. "Louisiana lost that hub city of New Orleans, and that's where that huge piece of loss is," he said.

Alabama residents losing homes to flooding will be significant, said Parsons, who noted that with 2004's Hurricane Ivan, damage was mostly from wind. With Katrina, southern Alabama is the most affected area, starting with Gulf Shores area and moving across the state, he said. "The further west of Mobile ... the worse it gets."

Terry, M. Lisotta, executive officer of Louisiana Citizens Property

Insurance Corp., said Louisiana Citizens is expecting 60,000 homeowners claims. But "putting a dollar value on it right now is unknown because they are mostly still underwater, so there is no adjusting being done," he said. Louisiana Citizens' total book value is $14 billion.

The recently formed Louisiana Citizens has $100 million in cash on hand and reinsurance of $340 million in excess of a $35 million retention.

Cash and Coverage

* THE ALABAMA Insurance Underwriting Association has $8.6 million in cash; reinsurance of $50 million in excess of a $20 million retention.

* THE MISSISSIPPI Windstorm Underwriting Association has $2.1 million in cash; reinsurance of $175 million in excess of a $10 million retention.

* LOUISIANA Citizens' Property Insurance Corp., newly formed in 2004, has $100 million in cash on hand and reinsurance of $340 million in excess of a $35 million retention.

Source: Property Casualty Insurers Association of America